LocGov Cases 1

Alvarez vs. Guingona

(Jan. 31, 1996)

A local Government Unit is a political subdivision of the State which is constituted by law and possessed
of substantial control over its own affairs. Remaining to be an intra sovereign subdivision of one
sovereign nation, but not intended, however, to be an imperium in imperia, the local government unit is
autonomous in the sense that it is given more powers, authority, responsibilities and resources

- RA 7720 (Converting Municipality of Santiago, Isabela into Independent Component City) is

being assailed by petitioners for being constitutionally infirm – because it did NOT originate
exclusively in the HoR (as mandated by 1987 Consti, Art. 6, Sec. 24)
o They also claim that Santiago has NOT met the minimum average annual income requied
in the LGC of 1991
- The history of the law comes from HB 8817 and its counterpart Senate Bill 1243. This led to
Committee Report 378 (on HB 8817) which recommended it be approved without amendment
since it is on all fours with SB 1243. This was approved and eventually signed by the President
on May 5, 1994 (RA 7720). A plebiscite was held and a great majority of the registered voters of
Santiago voted in favor of it.

Whether or not the Internal Revenue Allotments (IRAs) are to be included in the computation of the
average annual income of a municipality for purposes of its conversion into an independent
component city
Whether or not, considering that the Senate passed SB No. 1243, its own version of HB No. 8817,
Republic Act No. 7720 can be said to have originated in the House of Representatives.

Petitioners claim that Santiago could not qualify into a component city because its average annual income
for the last two (2) consecutive years based on 1991 constant prices falls below the required annual
income of Twenty Million Pesos (P20,000,000.00) for its conversion into a city, petitioners having
computed Santiago's average annual income in the following manner:
Total income (at 1991 constant prices) for 1991 P20,379,057.07
Total income (at 1991 constant prices) for 1992 P21,570,106.87
——————
Total income for 1991 and 1992 P41,949,163.94
Minus:
IRAs for 1991 and 1992  P15,730,043.00
——————
Total income for 1991 and 1992 P26, 219,120.94
Average Annual Income P13, 109,560.47

SC:
- Resolution of the controversy regarding compliance by the Municipality of Santiago with the
aforecited income requirement hinges on a correlative and contextual explication of the meaning
of internal revenue allotments (IRAs) vis-a-vis the notion of income of a local government
unit and the principles of local autonomy and decentralization underlying the
institutionalization and intensified empowerment of the local government system.
- A Local Government Unit is a political subdivision of the State which is constituted by law and
possessed of substantial control over its own affairs. Remaining to be an intra sovereign
subdivision of one sovereign nation, but not intended, however, to be an imperium in imperio, the
local government unit is autonomous in the sense that it is given more powers, authority,
responsibilities and resources.
o Power which used to be highly centralized in Manila, is thereby deconcentrated, enabling
especially the peripheral local government units to develop not only at their own pace and
discretion but also with their own resources and assets.
- Understandably, the vesting of duty, responsibility and accountability in every local government
unit is accompanied with a provision for reasonably adequate resources to discharge its powers
and effectively carry out its functions.
- Availment of such resources is effectuated through the vesting in every local government
unit of:
o (1) the right to create and broaden its own source of revenue;
o (2) the right to be allocated a just share in national taxes, such share being in the
form of internal revenue allotments (IRAs); and
o (3) the right to be given its equitable share in the proceeds of the utilization and
development of the national wealth, if any, within its territorial boundaries.
- The funds generated from local taxes, IRAs and national wealth utilization proceeds accrue to the
general fund of the local government and are used to finance its operations subject to specified
modes of spending the same as provided for in the Local Government Code and its implementing
rules and regulations. For instance, not less than twenty percent (20%) of the IRAs must be set
aside for local development projects.
- As such, for purposes of budget preparation, which budget should reflect the estimates of the
income of the local government unit, among others, the IRAs and the share in the national
wealth utilization proceeds are considered items of income.
o This is as it should be, since income is defined in the Local Government Code to be all
revenues and receipts collected or received forming the gross accretions of funds of the
local government unit.
- The IRAs are items of income because they form part of the gross accretion of the funds of the
local government unit. The IRAs regularly and automatically accrue to the local treasury without
need of any further action on the part of the local government unit.
 o They thus constitute income which the local government can invariably rely upon as the
source of much needed funds.

- SC  the claim of petitioners that RA. 7720 did not originate exclusively in the House of
Representatives because a bill of the same import, SB No. 1243, was passed in the Senate, is
untenable because it cannot be denied that HB No. 8817 was filed in the House of
Representatives first before SB No. 1243 was filed in the Senate. Petitioners themselves
cannot disavow their own admission that HB No. 8817 was filed on April 18, 1993 while SB No.
1243 was filed on May 19, 1993.
o Thus, HB No. 8817, was the bill that initiated the legislative process that culminated in
the enactment of Republic Act No. 7720. No violation of Section 24, Article VI, of the
1987 Constitution is perceptible under the circumstances attending the instant
controversy

DISMISSED.

Basco vs. PAGCOR (1991)

DOES NOT CONSTITUTE A WAIVER OF THE RIGHT OF LOCAL GOVERNMENT TO

IMPOSE TAXES AND LOCAL FEES; REASONS THEREFOR. — Petitioners contend that P.D. 1869
constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the exemption
clause in P.D. 1869 is violative of the principle of local autonomy. They must be referring to Section 13
par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax of any
kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether
National or Local." Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes.
Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot
assume it". Its "power to tax" therefore must always yield to a legislative act which is superior having
been passed upon by the state itself which has the "inherent power to tax"
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" which has the power to "create and abolish
municipal corporations" due to its "general legislative powers". Congress, therefore, has the power of
control over Local governments. And if Congress can grant the City of Manila the power to tax
certain matters, it can also provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early
as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or
permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government
Therefore, only the National Government has the power to issue "licenses or permits" for the operation of
gambling. Necessarily, the power to demand or collect license fees which is a consequence of the
issuance of "licenses or permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its
shares of stocks are owned by the National Government. In addition to its corporate powers it also
exercises regulatory powers.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government.
"The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control
the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the
federal government." This doctrine emanates from the "supremacy" of the National Government over
local governments. "Justice Holmes, speaking for the Supreme Court, made reference to the entire
absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of
the United States and it can be agreed that no state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local authorities may perceive to be undesirable activates or
enterprise using the power to tax as "a tool for regulation"

NOT A VIOLATION OF THE LOCAL AUTONOMY CLAUSE IN THE CONSTITUTION. —

The power of local government to "impose taxes and fees" is always subject to "limitations" which
Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or
revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the
exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but
rather is consistent with the principle of local autonomy. Besides, the principle of local autonomy under
the 1987 Constitution simply means "decentralization".
It does not make local governments sovereign within the state or an "imperium in imperio." Local
Government has been described as a political subdivision of a nation or state which is constituted by law
and has substantial control of local affairs. In a unitary system of government, such as the government
under the Philippine Constitution, local governments can only be an intra sovereign subdivision of one
sovereign nation, it cannot be an imperium in imperio. Local government in such a system can only mean
a measure of decentralization of the function of government. As to what state powers should be
"decentralized" and what may be delegated to local government units remains a matter of policy, which
concerns wisdom. It is therefore a political question. What is settled is that the matter of regulating, taxing
or otherwise dealing with gambling is a State concern and hence, it is the sole prerogative of the State to
retain it or delegate it to local governments.
 Vilas vs. City of Manila (1911)

The plaintiffs in error, who were plaintiffs below, are creditors of the City of Manila as it existed
before the cession of the Philippine Islands to the United States by the Treaty of Paris, December 10,
1898.
- Upon the theory that the city, under its present charter from the government of the Philippine
Islands, is the same juristic person and liable upon the obligations of the old city, these
actions were brought against it.
- The Supreme Court of the Philippine Islands denied relief, holding that the present
municipality is a totally different corporate entity, and in no way liable for the debts of the
Spanish municipality.
The fundamental question is whether (notwithstanding the cession of the Philippine Islands to the United
States, followed by a reincorporation of the city) the present municipality is liable for the obligations of
the city incurred prior to the cession to the United States.

Theory:
If we understand the argument against the liability here asserted, it proceeds mainly upon the theory that,
inasmuch as the predecessor of the present city, the ayuntamiento of Manila, was a corporate entity
created by the Spanish government, when the sovereignty of Spain in the islands was terminated by the
treaty of cession, if not by the capitulation of August 13, 1898, the municipality ipso facto disappeared for
all purposes. This conclusion is reached upon the supposed analogy to the doctrine of principal and
agent, the death of the principal ending the agency.
- So complete is the supposed death and annihilation of a municipal entity by extinction of
sovereignty of the creating state that it was said in one of the opinions below that all of the public
property of Manila passed to the United States, "for a consideration, which was paid," and that
the United States was therefore justified in creating an absolutely new municipality, and
endowing it with all of the assets of the defunct city, free from any obligation to the creditors of
that city. And so the matter was dismissed in the Trigas case by the Court of First Instance, by the
suggestion that
"the plaintiff may have a claim against the Crown of Spain, which has received from the United
States payment for that done by the plaintiff. "

SC:
We are unable to agree with the argument. It loses sight of the dual character of municipal
corporations. They exercise powers which are GOVERNMENTAL and powers which are of a
PRIVATE OR BUSINESS character.
In the one character, a municipal corporation is a governmental subdivision, and for that purpose
exercises by delegation a part of the sovereignty of the state.
In the other character, it is a mere legal entity or juristic person. In the latter character, it stands for the
community in the administration of local affairs wholly beyond the sphere of the public purposes for
which its governmental powers are conferred.
Lloyd vs. NY:
The corporation of the City of New York possesses two kinds of powers: one governmental and
public, and to the extent they are held and exercised, is clothed with sovereignty; the other
private, and to the extent they are held and exercised, is a legal individual.
The former are given and used for public purposes, the latter for private purposes.
While in the exercise of the former, the corporation is a municipal government, and
while in the exercise of the latter, is a corporate legal individual

In view of the dual character of municipal corporations, there is no public reason for presuming their total
dissolution as a mere consequence of military occupation or territorial cession.
The suspension of such governmental functions as are obviously incompatible with the new political
relations thus brought about may be presumed.

Where the case turned below on the consequence of a change in sovereignty by reason of the cession of
the Philippine Islands, the construction of the Treaty with Spain of 1898 is involved.
While military occupation or territorial cession may work a suspension of the governmental
functions of municipal corporations, such occupation or cession does not result in their dissolution.
While there is a total abrogation of the former political relations of inhabitants of ceded territory, and an
abrogation of laws in conflict with the political character of the substituted sovereign, the great body of
municipal law regulating private and domestic rights continues in force until abrogated or changed
by the new ruler.
Although the United States might have extinguished every municipality in the territory ceded by Spain
under the Treaty of 1898, it will not, in view of the practice of nations to the contrary, be presumed to
have done so.
The legal entity of the City of Manila survived both its military occupation by, and its cession to, the
United States, and, as in law, the present city, as the successor of the former city, is entitled to the
property rights of its predecessor, it is also subject to its liabilities.
The cession in the Treaty of 1898 of all the public property of Spain in the Philippine Islands did not
include property belonging to municipalities, and the agreement against impairment of property and
private property rights in that treaty applied to the property of municipalities and claims against
municipalities.
 Lidasan vs. COMELEC (1967)

RA 4790 was to create the Municipality of Dianaton in the Province of Lanao del Sur but includes barrios
located in another province (Cotabato). It is challenged by Bara Lidasan (taxpayer of Cotabato) for being
unconstitutional as its title (Creation) does NOT include the fact that there would be transfer of land from
another province. Lidasan relies on the constitutional requirement: that "no bill which may be enacted
into law shall embrace more than one subject which shall be expressed in the title of the bill”.

Suggestion was made that Republic Act 4790 may still be salvaged with reference to the nine
barrios in the municipalities of Butig and Balabagan in Lanao del Sur, with the mere nullification of
the portion thereof which took away the twelve barrios in the municipalities of Buldon and Parang in the
other province of Cotabato. The reasoning advocated is that the limited title of the Act still covers those
barrios actually in the province of Lanao del Sur.

SC:
Could we indulge in the assumption that Congress still intended, by the Act, to create the restricted area
of nine barrios in the towns of Butig and Balabagan in Lanao del Sur into the town of Dianaton, if the
twelve barrios in the towns of Buldon and Parang, Cotabato, were to be excluded therefrom? The answer
must be in the negative.
Municipal corporations perform TWIN FUNCTIONS.
Firstly. They serve as an instrumentality of the State in carrying out the functions of government.
Secondly. They act as an agency of the community in the administration of local affairs.
It is in the latter character that they are a separate entity acting for their own purposes and NOT a
subdivision of the State.

Speaking of the original twenty-one barrios which comprise the new municipality, the explanatory note to
House Bill 1247, now Republic Act 4790, reads:
"The territory is now a progressive community; the aggregate population is large; and the
collective income is sufficient to maintain in independent municipality.
This bill, if enacted into law, will enable the inhabitants concerned to govern themselves and
enjoy the blessings of municipal autonomy."

When the foregoing bill was presented in Congress, unquestionably, the totality of the twenty-one
barrios— not nine barrios—was in the mind of the proponent thereof. With the known premise that
Dianaton was created upon the basic considerations of progressive community, large aggregate
population and sufficient income, we may not now say that Congress intended to create Dianaton with
only nine—of the original twenty-one—barrios, with a seat of government still left to be conjectured.
Paying due respect to the traditional separation of powers, we may not now melt and recast Republic Act
4790 to read a Dianaton town of nine instead of the originally intended twenty-one barrios. Really, if
these nine barrios are to constitute a town at all, it is the function of Congress, not of this Court, to spell
out that congressional will.
RA 4790 is VOID.
Republic vs. City of Davao (2002)

- Davao City filed an application for a Certificate of Non-Coverage for its proposed project (Davao
City Artica Sports Dome) with the Environmental Management Bureau (EMB).
o The EMB denied the application after finding that the proposed project was within an
environmentally critical area – which means that, by PD 1586 (Environmental Impact
Statement System), Davao City must undergo environmental impact assessment (EIA)
process before it can continue with the project.
- Davao City instead filed a petition for mandamus and injunction
- RTC  granted mandamus
o There is nothing in PD 1586, in relation to PD 1151 and Letter of Instruction No. 1179
(prescribing guidelines for compliance with the EIA system), which requires local
government units (LGUs) to comply with the EIS law.
o Only AGENCIES and instrumentalities of the national government, including
government owned or controlled corporations, as well as private corporations, firms and
entities are mandated to go through the EIA process for their proposed projects which
have significant effect on the quality of the environment.
o A local government unit, not being an agency or instrumentality of the National
Government, is deemed excluded under the principle of expressio unius est exclusio
alterius.
- Mootness: With the supervening change of administration, respondent, in lieu of a comment, filed
a manifestation expressing its agreement with petitioner that, indeed, it needs to secure an ECC
for its proposed project. It thus rendered the instant petition moot and academic.
- However, for the guidance of the implementors of the EIS law and pursuant to our symbolic
function to educate the bench and bar, we are inclined to address the issue raised in this petition.

SC:
- Section 15 of Republic Act 7160, otherwise known as the Local Government Code, defines a
local government unit as a body politic and corporate endowed with powers to be exercised by it
in conformity with law.
- As such, it performs dual functions, governmental and proprietary.
o Governmental functions are those that concern the health, safety and the advancement
of the public good or welfare as affecting the public generally.
o Proprietary functions are those that seek to obtain special corporate benefits or earn
pecuniary profit and intended for private advantage and benefit.
- When exercising governmental powers and performing governmental duties, an LGU is an
AGENCY of the national government.
- When engaged in corporate activities, it acts as an agent of the community in the
administration of local affairs
- Found in Section 16 of the Local Government Code is the duty of the LGUs to promote the
people's right to a balanced ecology.
o Pursuant to this, an LGU, like the City of Davao, cannot claim exemption from the
coverage of PD 1586.
o As a body politic endowed with governmental functions, an LGU has the duty to ensure
the quality of the environment, which is the very same objective of PD 1586